- (1.) THE appellant-assessee retired serving as a Judge of the Allahabad High court. In this Income Tax Appeal he is aggrieved by the order of the Income Tax Appellate Tribunal, Delhi Bench; SMC-VI, New Delhi in ITA No.1263/Del/2003, for the assessment year 1998-99, dated 10th June, 2004 dismissing the appeal of the assessee with the findings that the 'dearness relief' is covered within the expression, 'any payment received from a former employer by the assessee', and would be included in the definition of, 'profits in lieu of salary', to be taxed under Section 17 (3) (ii) of the Income Tax Act, 1961.
(2.) WE have heard Shri Pramod Kumar Jain, Sr. Advocate assisted by Shri Amitabh Agrawal, learned counsel for the appellant. Shri R.K. Upadhyaya appears for the respondents. The appeal was admitted on the substantial questions of law as follows:- "(A) Whether the receipt of the amount of dearness relief Rs.53,640/- to the appellant, a pensioner (retired High Court Judge), in the assessment year 1998-99, is income and taxable as 'profit in lieu of salary' (Section 17 (3) (ii) of Income Tax Act? (B) Whether dearness relief can be said to be profit in lieu of salary within meaning of Section 17 (3) (ii) of the Income tax Act? (C) Whether dearness relief and dearness allowance can be said to have same meaning and authority below erred in law in treating dearness relief and dearness allowance to be meaning the same thing?" The appellant assessee filed a return in the capacity of individual showing total income of Rs.1,72,800/- on 30.10.1998 for the assessment year 1988-99. The return was processed under Section 143 (1) on 14.12.1999 on the income returned. A notice under Section 148 dated 17.2.2000 was issued and was served on the assessee. In reply the assessee sent a letter on 4.5.2000 stating that he has already filed a return, which may be treated as the return filed in compliance to the notice under Section 148 of the Act. During the course of assessment proceedings he filed revised return on 6.9.2000 disclosing the income of Rs.1,72,800/- as general in the original return. In the revised return the assessee left a note against the pension income as follows:- "Pension excluding advised and so bonafide to not being income but mere dearness relief, received Rs.53,640/- during the year".
(3.) THE assessee appeared and submitted his books of accounts for provisional income, which included a small exercise book and bank pass book, which was examined. The Assessing Officer (AO) was of the opinion that the dearness relief of Rs.53,640/- claimed to be exempt, was income from salary and was taxable. The A.O. calculated the income of the assessee excluding dearness relief to Rs.2,17,840/-. He allowed credit for prepaid tax, and directed charging of interest under Section 234B and 234C as per Rules. He also directed the issuance of penalty notice under Section 271 (1) (C) for concealment of income. In appeal the CIT (A) upheld the order of A.O. The CIT (A) did not find any substance in the submission that the dearness relief should not be treated as income and relied upon CIT v. L.W. Russel, 1964 (53) ITR 91 in which it was held that the dearness relief is not a perquisite allowed by the employer or an amount due within the meaning of Section 17 (1) of the Act. The dearness relief is income taxable under the Act.;